Canada posts unexpected trade deficit, Loonie falls

Canada's Dollar slipped to the lowest level in six months versus its U.S. counterpart amid divergent economic developments in the countries, as Canada's boosting export recovery unexpectedly retreated, while bullish U.S. unemployment data pushed the Greenback higher. The Canadian Dollar suffered one of its biggest one-day losses of the year, down to 88.80 U.S. cents on October 3, after Statistics Canada reported an unexpected trade deficit of $610-million in August, compared with the $1.6-billion surplus analysts had expected. Exports declined 2.5% from July, a surprising drop following three consecutive months of solid gains that fuelled optimism over the nation's accelerating economic recovery. Shipments declined in nine of the 11 categories, denting Bank of Canada Governor Stephen Poloz 's hopes that exports may have finally turned the corner. Exports to the U.S., Canada's largest trading partner, fell 2.5% due to lower shipments of motor vehicles and parts as well as energy products. Exports to the EU and Japan also declined, and Canada's trade deficit with countries other than the U.S. widened to C$4.1 billion. The trade deficit was the largest since November 2013 and followed a recent bunch of disappointing economic figures for Canada, including a net loss of jobs in August and a flat GDP reading for July. They underscore expectations for the Bank of Canada to keep its key interest rate steady and hold onto its neutral policy bias at its policy meeting later this month.